Occidental Petroleum Pipeline Permian decline in Occidental Petroleum Corp.’s oil production in the Permian Basin has left the company with so much unused capacity on pipelines to the Gulf Coast that the problem will drive a midstream loss of as much as $750 million this year.
Occidental said that total Permian production is expected to be about 485,000 barrels of oil equivalent a day this year, well short of the 800,000 barrels of pipeline space it’s committed to. That means the company needs to buy the balance elsewhere, adding to costs.
Occidental Petroleum Pipeline Permian situation appears to be a reversal of what happened in 2018, when pipeline capacity out of the Permian was in short supply and Occidental benefited handsomely from being able to buy barrels there cheaply and then sell them at a premium in Houston and Corpus Christi. In a single quarter that year, the midstream division earned $796 million, more than seven times what it made in the whole of 2017.
Chief Executive Officer Vicki Hollub said Tuesday the company has so far been unable to reduce costs associated its long-term pipeline contracts, which roll off in 2025.
“We’ve had conversations with other companies and potential partners and we have not come across a solution that was acceptable to us from a value standpoint,” she said on the company’s earnings conference call. “We’re not willing to sacrifice value to do a deal that is going to negatively impact us in the future.”
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Oxy Pipeline Permian
Occidental’s Permian Resources business develops unconventional reservoirs using horizontal drilling techniques. With approximately 1.35 million unconventional net acres in the Permian Basin at the end of 2018, Permian Resources is focused on developing and growing inventories in the Wolfcamp and Bone Springs formations in the Delaware Basin, as well as the Spraberry and Wolfcamp formations in the Midland Basin. The company is also appraising and delineating several other resource plays for future development Occidental Petroleum Pipeline Permian.
Oxy Slaughter Field
Slaughter Field is a 100,000+ acre conventional oil and gas field 40 miles west of Lubbock, TX in Cochran, Hockley, and Terry Counties. It was discovered in 1936 by a three-way venture between Honolulu Oil Company, Devonian Oil Company, and Cascade Petroleum Company. The area was originally two different fields: Duggan Field (on the west) and Slaughter Field (on the east). When it was proven that both Duggan Field and Slaughter Field were producing from the same formation, they were combined under a single field regulation named Slaughter Field. In March 2015, it ranked 25th on the United States Energy Information’s Top 100 U.S. Oil and Gas Fields.
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